With the massive increases in the price of oil and other commodities, it is becoming obvious to just about everyone-with the exception of the Treasury-that these price forces are a result of institutionalized speculation. Looking at this historically, this point was inevitable considering that since 1975 there has been looming financial crisis that have not fully corrected themselves. Conservatives deride the government for being pro-lazy, etc. The reality is that the government works in the interests of corporations and their interests.
Since the first oil crisis in 1973, the American economy has transformed itself from a industrial society with a fairly equitable distribution of income and a strong progressive bent, whereas today the United States could not be further from that. In that process of rising inequality, deindustrialization, and increasing poverty has seen the role of FIRE (financials) increase exponentially to becoming the major industry in the United States. As the financial sector was gradually deregulated and given freer and freer reign with less and less government oversight the curses of rampant financial speculation has created a monster beneath the surface of a calm economy.
Consider the number of unresolved crisis' in the financial sector since 1975:
-1982: Debt Crisis
-1987: S&L Crisis
-1998: LTCM Crisis
-2000: DOT-COM Bubble
-2001: ENRON/TYCO/Global Crossing
-2007: Sub-prime mortgage Crisis
-2008: Oil Bubble
-20??: Next Crisis
Each succeeding crisis has gotten worse, and there are troubling reasons why. First, the Fed and the government since the early 1980s has engaged in the logic of "Too Big To Fail" T.B.T.F, whereby they save banks and after Bear Sterns, investing institutions. This is known as a moral hazard, if these massive amalgamated corporations with such leverage over the whole economy know that the government and the tax payer will bail them out, they will continue their highly speculative behaviour for short-term profit. The welfare state does not exist for the poor, rather it exists for the rich who make stupid decisions.
Secondly, with the take over of Bear Sterns by the Fed and J.P. Morgan, the concentration of power increases exponentially in smaller and smaller hands. Each succeeding crisis has lead to collapses of financial corporations, and the selling of assets to a smaller and smaller group of what is termed "dominant capital". Thus, as these mega-corporations become more and more mega...the government will have no choice to come in and save them.
Thirdly, the government has been increasingly lax in the regulation of the markets. Hedge-funds are basically free of any regulatory oversight, as evidenced in the LTCM affair in 1998:
Hedge funds are not regulated by anybody. Indeed, they are legally exempt from the two major pieces of legislation which govern other firms in the financial industry: the Securities Exchange Commission Act of 1934 and the Investment Company Act of 1940. In order to remain exempt from the Investment Company Act, hedge funds must have fewer than a hundred investors, or, alternatively, their investors must be worth at least five million dollars each. (In order to avoid the reporting requirements of the Securities Exchange Act, hedge funds must have fewer than five hundred investors.) The securities laws were designed to protect ordinary investors from Wall Street tricksters. Rich people were viewed as smart enough to look after themselves. (New Yorker, 1999)
About the current crisis in oil:
"A June 2006 US Senate Permanent Subcommittee on Investigations report on “The
Role of Market Speculation in rising oil and gas prices,” noted, “...there is
substantial evidence supporting the conclusion that the large amount of
speculation in the current market has significantly increased prices.”
What the Senate committee staff documented in the report was a gaping loophole
in US Government regulation of oil derivatives trading so huge a herd of elephants
could walk through it. That seems precisely what they have been doing in ramping
oil prices through the roof in recent months." (Engdahl, May 2)*
Without any meaningful government oversight, these super-elite can do whatever they want and not suffer the consequences. CEO's do not care about the economy, or even their own corporations they care about their own value. Meaning they manipulate the market by creating hype, and when they know things are going to tank they short their stocks or sell their long positions. Then they are exposed, are fired (and paid millions to be fired) and get a new CEO position somewhere else. This is a totally new class of rich, they have no loyalty to country, company, nothing but themselves. These transient CEO's remind me of those unemployed men in the 1930s on the trains looking for work, hobo's. According to eminent American sociologist, Thorstein Veblen on this very subject (written in 1904):
It follows, further, that under these circumstances the men
who have the management of such an industrial enterprise,
capitalized and quotable on the market, will be able to induce a
discrepancy between the putative and the actual earning-capacity,
by expedients well known and approved for the purpose. Partial
information, as well as misinformation, sagaciously given out at
a critical juncture, will go far toward producing a favorable
temporary discrepancy of this kind, and so enabling the managers
to buy or sell the securities of the concern with advantage to
themselves. If they are shrewd business men, as they commonly
are, they will aim to manage the affairs of the concern with a
view to an advantageous purchase and sale of its capital rather
than with a view to the future prosperity of the concern, or to
the continued advantageous sale of the output of goods or
services produced by the industrial use of this capital.
That is to say, the interest of the managers of a modern
corporation need not coincide with the permanent interest of the
corporation as a going concern; neither does it coincide with the
interest which the community at large has in the efficient
management of the concern as an industrial enterprise. It is to
the interest of the community at large that the enterprise should
be so managed as to give the best and largest possible output of
goods or services; whereas the interest of the corporation as a
going concern is that it be managed with a view to maintaining
its efficiency and selling as large an output as may be at the
best prices obtainable in the long run; but the interest of the
managers, and of the owners for the time being, is to so manage
the enterprise as to enable them to buy it up or to sell out as
expeditiously and as advantageously as may be.
(Veblen, Theory of Business Enterprise)
Fourthly, the warfare state has been another source of corporate welfare. The perpetual "War on Terror" and its corresponding imperialist war in Iraq have lead to a privatization of the most basic functions of the liberal state, the monopolization of the legitimate use of violence in the state's hands.Iraq's oil fields now-as mentioned by Cenk-are now back in the hands of Western dominant capital, principally the five-sisters, Exxon, Shell, BP, Total, Chevron.** Iraq is being neoliberalized as it was one of the only state's in the post-Cold War period that refused to accede to American hegemony. A warning about the effects of imperialism within a liberal democratic country was sounded by J.A. Hobson back in 1902, from my essay on the subject of imperialism:
"Understandably, Hobson perceived imperialism to be a destabilizing factor to the
future of Britain as a liberal democracy; the much larger scale of imperialism, the capture
of the state by investing class interests, the forcible submission of large foreign
populations, and imperial competition with other imperialist states. Hobson wrote, “as a
result of imperial competition, an ever larger proportion of the time, energy, and money
of ‘imperialist’ nations is absorbed by naval and military armaments” (Hobson II.I.40).
An observation not lost on Etherington who noted that “two-thirds of government
spending” is due to these military expenditures (Etherington 22). This militarization had
social effects that Hobson saw as being anti-democratic and authoritarian. “Both the
colonial administrator and the professional soldier acquired habits of mind fundamentally
at odds with liberal democracy” (Etherington 23). Hobson also warned about the consequences of this move towards militarism, and the growing tendency towards
illiberality in Europe and Britain in the early twentieth century as inter-imperialist
competition began to grow"
The US government has been engaging in right-wing populism (corporatism) for the last 30 years, prejudicing against the average working man and woman in the United States, destroying the family, and creating increasingly precarious situations for the youth. Meanwhile incomes of the super-rich have increased hundreds of times. In 2006, 50% of the nations income went to the richest 20% and that has increased since then. This is the REAL welfare state, one of neglect, negligence and subsidy at the cost of your living standards and that of your heavily indebted children born with the "original debt".
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